美源伯根 (ABC) 2020 Q2 法說會逐字稿

Good day, and welcome to the Amerisource Second Quarter 2020 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Bennett Murphy, Head of Investor Relations. Please go ahead, sir.

Thank you. Good morning, and thank you all for joining us in this conference call to discuss AmerisourceBergen's Fiscal 2020 Second Quarter results. I am Bennett Murphy, Senior Vice President, Investor Relations. And joining me today are Steve Collis, Chairman, President and CEO; and Jim Cleary, Executive Vice President and CFO.

On today's call, we will be discussing non-GAAP financial measures. Reconciliations of these measures to GAAP are provided in today's press release and are also available on our website at investor.amerisourcebergen.com. We've also posted a slide a presentation to accompany today's press release to our website.

During this conference call, we'll make forward-looking statements about our business and financial expectations on an adjusted non-GAAP basis, including, but not limited to, EPS, operating income and free cash flow. Forward-looking statements are based on management's current expectations and are subject to uncertainty and change. For a discussion of key risks and assumptions, we refer you to today's press release, our SEC filings, including our most recent 10-K. Management of AmerisourceBergen assumes no obligation to update any forward-looking statements on this call, and this call cannot be rebroadcast without the express permission of the company.

(Operator Instructions)

With that, I'll turn the call over to Steve.

Thank you, Bennett, and good morning to everyone on today's call. As you saw from our earnings release, AmerisourceBergen delivered excellent performance for the second quarter and first half of fiscal 2020. With a strong first half of the year behind us, I will focus this morning's call on 2 main areas. First, we will discuss AmerisourceBergen's actions in response to the COVID-19 pandemic and second, we will talk about how AmerisourceBergen is positioned to deliver value over the long-term for our shareholders and also for our associates, customers, suppliers and our communities. Jim will then discuss our results in more detail and our outlook for the remainder of the year.

First, with regard to the actions we have taken in response to the COVID 2019 dynamic. I've never been prouder of AmerisourceBergen and our associates. We have been guided by our purpose and values, and the company has prioritized supporting the safety of our associates. In turn, our associates have been innovating in helping our manufacturer and provider customers navigate new or intensified challenges. The health, safety and well-being of our associates is paramount, and we have taken several steps to support our frontline associates, which have included, enhanced cleaning protocols and additional support from third-party cleaners, enhanced paid time-off for associates needing to quarantine or care for family members, weekly bonuses for frontline associates and backup dependent care. These measures are important in protecting and supporting our associates and key to AmerisourceBergen's ability to support the foundational elements of healthcare. As you can imagine, the necessity of our services and solutions has been highlighted and amplified as manufacturers and providers navigate increased complexity and new challenges.

To help efficiently and effectively address these challenges head on, we established an internal response task force that is made up of key experts and leaders across the company. Our task force has been advising individual teams and leaders and also meets with government officials. Task force help us move quickly to implement our business continuity plans, which are enabled by the robustness of our distribution network, technology and the talent and innovation of our associates.

The strength of our infrastructure has enhanced our ability to provide patients access to the medications they need. AmerisourceBergen has a history of investing in our businesses and capabilities, giving us significant technological and operational flexibility. Last month, we demonstrated this when we temporarily closed one of our largest distribution centers out of an abundance of caution, given its proximity to a COVID-19 hot spot. We invoked our business continuity plan for the region and seamlessly transferred volume to other AmerisourceBergen distribution centers. We used the temporary closure to perform extensive sanitation measures at the location. AmerisourceBergen also moved decisively to protect non frontline associates. We were able to quickly shift all suitable roles to working remotely. This important distancing measure was achieved as a result of close leadership collaboration and strong IT infrastructure. The types of proactive measures would not be possible without the significant investments we have made in our distribution center, network and technology.

On the pharmaceutical supply side, our sourcing and commercial teams have worked diligently to ensure that we are understanding demand and forecasting sustainability of supply to maintain the necessary inventory to address varying needs. We have made it a priority to keep in regular communication with all stakeholders to best maintain continuity of supply and meet increased demand from providers. This has been a period when alignment and coordination is vital. And we have amplified our proactive approach to communications and engagements. Our teams have held numerous customer virtual town halls in order to discuss factors influencing the supply chain, outline our response and business continuity and articulate the resources available to our customers. These events have facilitated reach to thousands of participants, and are a good example of AmerisourceBergen's calm, transparent and patient-focused response.

Despite these uncertain times, I have been inspired daily by the dedication, innovation and thoughtfulness displayed by AmerisourceBergen associates. We have seen firsthand the importance of our purpose-driven organization, especially given the vital role AmerisourceBergen plays in the healthcare system. It is times like these that reinforce our confidence in AmerisourceBergen's strategic position, resiliency and ability to provide critical services and solutions in any economic climate.

Over the years, we have focused much of our time with investors and analysts on providing visibility into AmerisourceBergen's 4 strategic pillars. While the world around us has changed the way we are now working, the way we connect and the way we communicate, the key differentiators that set AmerisourceBergen apart remain a constant. Let me remind you of them and why they underscore our confidence in our strategic positioning.

First, we have a diverse portfolio of customers with key anchor relationships in each segment. We have built and nurtured long-standing and collaborative partners with a diverse group of customers, ranging from community and national retailers to health systems and community physicians. An example from one of these customer groups is our Good Neighbor Pharmacy, where members have been working tirelessly on the front lines to ensure their patients continue getting the care they need even when things are at their most chaotic. Whether by creating care packages for at-risk customers, providing drive-through services, to making hand sanitizer or keeping in touch with patients via social media, our independent pharmacy partners have done an exemplary job of showcasing the crucial part they play in improving community health. These types of relationships enable us to capitalize on pharmaceutical utilization in the United States across a variety of settings and distribution channels.

Second, we maintain market-leading positions in specialty distribution and services, where pharmaceutical innovation and demographic trends will continue to drive long-term growth. During this period of social distancing, we've been working with our provider customers to help them navigate the complexity of operating in this environment, understanding that there are some natural delays in patients seeing doctors for necessary referrals. We believe the ability -- the availability of testing and improved operability of practices will enable these practices to serve more efficiently the complex needs of their new and existing patients.

We have worked closely with our community physician practices to provide advanced analytics to help them navigate the temporary slowdown in patient visits due to social distancing. At the same time, our commercialization teams are working closely with their manufacturer partners to support efforts to ensure patients continue to be able to access vital pharmaceutical therapies.

Our Lash business has been supporting our partners program that helps eligible unemployed patients maintain access to therapy despite loss of health insurance due to COVID-19. Additionally, World Courier's capability to provide direct-to-patient clinical trial services has been a key asset in supporting the shift of healthcare out of hospitals and into the home, thereby lowering the burden on hospitals and pharmacies. As complexity increases, World Courier thrives as its capabilities are unparalleled in its market.

Navigating complexity is a foundational trait of AmerisourceBergen, and it powers our third key differentiator, our ability to provide innovative services and solutions. We proactively invest and innovate to be best-in-class partners, as evidenced by the foresight that guided us to dedicate capital expenditures in our distribution center network, IT capabilities and specialized customer-focused solutions. One such example is a tool we are using to provide the advanced analytics for our community physician customers. Physician practices are leveraging our strategic financial intelligence solution, Infodat, to monitor and evaluate potential areas of concern. Given the current situation, we are providing analyses to monitor areas impacted by COVID-19, such as new patient volume, transition to Telehealth services and potential delays in claims processing and payments. At MWI, our team recognized that the need for veterinarian practices to virtually engage with their client has become critically important. In response, the business announced a series of technology tools to provide improved remote communication and enable curbside operations for practices and their patients. These examples illustrate a core strength for AmerisourceBergen. Our talent, expertise and resources facilitate our ability to provide comprehensive solutions.

Finally, AmerisourceBergen continues to be a strong corporate steward with a focus on advancing talent and culture and maintaining strong financial health. Our talent and culture have been on full display in these recent weeks, delivering unparalleled value for all our stakeholders. We have heard from individuals across the organization that they are proud to work for a company like AmerisourceBergen, with our priority on our purpose and values, especially during times of great societal need.

At the same time, the financial health of the organization remains unchanged, with one of the strongest balance sheets in company history and a continued focus on cash flow generation. This financial stability and strength provides AmerisourceBergen with the flexibility and firepower to navigate the current environment effectively and continue to deploy capital appropriately in order to provide long-term value for all our stakeholders.

Now I will turn the call over to Jim to discuss our second quarter results and revised outlook for fiscal 2020. Jim?

Thanks, Steve, and good morning, everyone. My remarks today will focus only on our adjusted non-GAAP financial results. Growth rates and comparisons are made against the prior year March quarter, unless otherwise noted. For a discussion of our GAAP results, please refer to our earnings release.

Before I discuss our second quarter financial results and revised outlook for the second half of the year, I want to first take a moment to reflect on AmerisourceBergen and the COVID-19 pandemic.

In February, I reached my 5-year mark with the company. And over these past several weeks, I have never been prouder to be part of AmerisourceBergen. On our November earnings call, I said the associates, businesses and culture across AmerisourceBergen are fundamental to our success and to the incredible value proposition we deliver for our manufacturer and provider partners. While I did not know then the unprecedented circumstances we find ourselves in now, the fundamental truth remains unchanged. AmerisourceBergen's talent, purpose and businesses have the company and our partners well positioned to navigate new challenges and increased complexity. The vital access we enable and solutions we provide have taken center stage as healthcare has never been more important and the need for efficiency and stability so paramount. Our purpose and our culture are guiding our company and I feel privileged to be a part of it.

We have been able to leverage significant internal resources and capabilities to meet the evolving needs of our upstream and downstream partners. Over the years, AmerisourceBergen has prioritized internal investment before all other capital deployment. Steve already detailed many of the investments that we are benefiting from now. So I will simply say that the results validate the investments in our businesses. The infrastructure tools, resources and talent that AmerisourceBergen has amassed enables our robust business continuity plans to ensure continued patient access.

Turning now to discuss our financial results and expectations. I will provide commentary in 2 main areas this morning. First, I will quickly cover our adjusted quarterly consolidated and segment performance, and second, I will cover the revision to our fiscal 2020 guidance. Given the current environment, I will focus much of my commentary on quantitative and qualitative color that is valuable in understanding the various impacts of COVID-19.

Beginning with our second quarter results, we finished the quarter with adjusted diluted EPS of $2.40, an increase of 14%, primarily due to higher operating income and, to a lesser extent, a lower share count. Our consolidated revenue was $47.4 billion, up over 9%, driven by strong revenue growth in both the Pharmaceutical Distribution Services segment and Other, our Global Commercialization Services & Animal Health Group. Gross profit increased 7% or $99 million to $1.4 billion. Consolidated operating expenses increased 6% to $745 million. While operating expense growth in the quarter was driven by the timing of certain onetime items, we expect full year fiscal 2020 operating expense growth to be in the low single-digit range. Consolidated operating income was $672 million, up 9%, with our operating margin flat to the prior year quarter.

As I noted in January, the March 2020 quarter benefited from the removal of PharMEDium from our adjusted results after the January decision to permanently exit the business, which incurred $14 million of operating losses in the prior year March quarter. Operating income still would have grown nearly 7% without that year-over-year comparison tailwind. Net interest expense decreased $9 million to $34 million. The adoption of the new lease accounting standard in fiscal 2020 continues to have a favorable impact on the interest expense line.

We have benefited from interest income on higher-than-expected cash balances in the first half of the year. Given the recent Federal Reserve rate cuts, we do not expect to have as significant of a benefit from interest income. Looking at the balance of the year, we expect quarterly net interest expense to be relatively in line with the March quarter.

Moving now to income taxes. Our adjusted income tax rate was 21.5%, flat compared to the prior year quarter. Our diluted share count decreased 3% to 207 million shares. Fiscal year-to-date, we have repurchased approximately $400 million of our shares.

Regarding free cash flow and our cash balance, fiscal year-to-date, we had adjusted free cash flow of $910 million, putting us right on track with our guidance for full year adjusted free cash flow of approximately $1.5 billion. We ended the quarter with $3.7 billion in cash, of which $435 million was held offshore and generally in U.S. dollar-denominated holdings.

This completes the review of our consolidated results. Now I'll cover our segment results.

Beginning with Pharmaceutical Distribution Services, segment revenue was $46 billion, up 9%. This segment continued to benefit from growth of some of its largest customers, continued strong growth in specialty distribution and overall market growth. In the quarter, we experienced increased pharmaceutical demand as many of our customers increased their purchases at the onset of COVID-19, resulting in higher revenue and gross profit. However, we also incurred elevated operating expenses, and consequently, there was no significant impact to operating income. Segment operating income increased about 9% to $563 million. We continued to benefit from our leading specialty physician services businesses and maintaining a strong portfolio of distribution customer relationships.

I will now turn to the Other segment, which includes businesses that focus on Global Commercialization Services & Animal Health, including World Courier, AmerisourceBergen Consulting and MWI. In the quarter, total revenue was $1.9 billion, up 13%, with all 3 operating segments delivering double-digit growth. The group had operating income of $108 million, up 8%, primarily driven by gross profit growth at MWI and World Courier, offset in part by higher operating expenses.

This completes the review of our second quarter results so I will now turn to our revised fiscal 2020 guidance.

As we said in this morning's press release, we are lowering our fiscal 2020 adjusted EPS guidance to a range of $7.35 to $7.65, down from the previous range of $7.55 to $7.80. And normally, after the execution and performance of our businesses in the first half, we would be raising our full year guidance. However, given these unprecedented times, we must revise guidance to reflect the potential impacts of COVID-19 for the second half of the year.

As we look at the second half of the year, the main factors impacting the range of potential outcomes for the year is the magnitude and duration of patient disruption. We have analyzed and probability weighted the potential COVID-19 related impacts on our various business units. Overall, we feel strongly that the current disruption is manageable for AmerisourceBergen and our businesses are resilient. We are also monitoring weekly volume trends to understand business and product mix impacts. April trends provide some insight and were encouraging, with sales growth overall for our full line distribution and oncology.

Our non-oncology physician business saw significant weekly sales decline year-over-year in the beginning of April, but those declines began to soften towards the end of the month. We anticipate that for the physician class of trade, delays in diagnoses and necessary testing will delay future sales of physician-administered pharmaceuticals.

Additionally, certain of our Global Commercialization Services & Animal Health businesses, in particular, MWI, will be impacted by lower volumes.

Overall, our revised guidance factors in a double-digit adjusted EPS decline in the third quarter, some of which is related to the March pull-forward of Pharmaceutical sales that I called out earlier, and then a return to EPS growth in the fourth quarter. Factors that move us within our guidance range include the magnitude of the COVID-related impacts on our businesses and also the speed of the rebound of our businesses. Factors that are not incorporated into our guidance range, because we do not currently expect these factors to occur, include a higher magnitude impact of COVID-19 on our businesses throughout our full fourth quarter and any significant bad debt expense beyond current assumptions.

The resulting full year guidance ranges are: revenue in the low- to mid- single digit percent growth range; operating income, both at the consolidated level and pharmaceutical distribution, to be in the low to mid-single-digit percent growth range; operating income for Other, our Global Commercialization Services & Animal Health businesses, is now expected to decline in the low single-digit percent range.

Finally, given the share buyback so far this year, we are lowering our expectation for weighted shares outstanding to between 206 million and 207 million shares, down from our previous expectation of approximately 208 million shares for the year. There is no change to our adjusted free cash flow guidance of approximately $1.5 billion for fiscal 2020. The health of our cash flow and balance sheet supports AmerisourceBergen's ability to focus on ensuring continued patient access to care.

In closing, there is still much that remains to be learned as the country, states, businesses and individuals contemplate the appropriate path forward. But hopefully, you will appreciate the guidance update and additional color as we seek to enhance transparency and communication, especially in this unprecedented environment. AmerisourceBergen is focused on doing what is best, protecting and supporting our associates, providing key services and solutions to our partners to enable continued patient access and creating long-term value for all our stakeholders. We are well positioned by our pharmaceutical-centric strategy with deep strategic relationships across our company and significant financial strength. And importantly, we are guided by our purpose, driven by our talent and culture and positively differentiated by our businesses and our customers.

Thank you for your interest in AmerisourceBergen. Now I will turn the call back over to Steve.

Thank you, Jim. Before turning the call over for Q&A, I want to take a minute to discuss AmerisourceBergen's commitment to responsible corporate citizenship.

As we highlighted in our recently published 2019 corporate citizen report, our focus on inspired associates, sustainable operations and healthy communities enables AmerisourceBergen to advance environmental, social and governance initiatives to create healthier futures around the world. Our commitment to the health of our associates and communities influences every decision we make and has served as a vital guide as the world around us continues to change. The past several weeks have been a period of disruption for the world and has brought many challenges. Our lives have been dramatically altered and the importance of health and well-being has been reinforced. While I cannot tell you what exactly will happen in each and every element of our business over the coming weeks and months, I can tell you that we will emerge from this period with enhanced capabilities and solutions as well as a heightened awareness of the value we create for all stakeholders.

I have been profoundly impressed by the exceptional leadership and collaborative teamwork throughout the organization. Thanks to this, we have been able to rapidly adapt and proactively address potential concerns caused by COVID-19. I'd like to thank, in particular, those associates on the front lines our nurses, pharmacist and distribution center associates whose powerful devotion and determination made this all possible. AmerisourceBergen is powered by the talent of our associates, and we are staying true to and guided by our purpose of being united in our responsibility to create healthier futures.

Thank you for your interest in AmerisourceBergen. Please stay safe and healthy. I will now turn the call over to the operator to begin Q&A.

(Operator Instructions) Today's first question comes from Lisa Gill with JPMorgan.

Steve, I know you and I have both been around for a long time. We lived through '01, '02, 2008, 2009. As we start to think about this potential recessionary environment post COVID-19, how are you thinking about pharmaceutical utilization, looking back at those periods, thinking about this, what you have in your guidance, you talked about the rebound getting into your fourth quarter. But generally speaking, if you can talk about trends there, any trends that you're seeing shifts? I think one of the concerns in the market is that if we do see more people getting prescriptions delivered to the home, what does that mean for the margins on that business for home delivery with PBMs for mail order versus coming into the pharmacy.

And then how do we think about specialty trends? Again, you talked about oncology coming back. As we think about April, non-oncology is still weak. But what's your anticipation there as we start to think about things like telemedicine, virtual care visits, as this world starts to change with COVID-19.

I know that's a lot to kind of break down there, but I just want to really understand how you think about the trends going forward.

Yes. Lisa, thank you. We must have been around a long time because you asked me most of our Q&A prepared in one question. But there's no doubt, look, I think when we started this, I was still hoping we could hold, for example, our Board meeting at the end of May in person. I was reluctant to change it to a virtual meeting. So there's no doubt that this has been more sustained, more serious than anything we faced -- the society in recent memory, which you don't need me to punt on. We have more than enough people are parting on that. I think in healthcare, look, prescriptions are the most efficient form of healthcare. They've proven to be very resilient. Patients want to continue to take their prescriptions. So we start with that, that's a really good business. Some of the trends, obviously, it's been difficult for people to get to physicians' offices. I think it's been somewhat interesting. A friend of mine, who is a cardiologist, said, people are willing to go to the grocery store, but they're not willing to come visit me when they have a serious issue, and that led to much more serious issues. So I think there's been -- when I think about reopening, I hope that the first thing people will do is go back to their physicians' offices, their dentists, their physical therapists, this is what they should be thinking about getting back to health and wellness as a priority.

But a couple of trends. Microsoft said on their earnings call that they've -- 2 years, they've experienced 2 years of digital acceleration in 2 months. I think in Telehealth, I've heard it described as 10 years of acceptance. Having said that, post COVID, there will be much more restrictions, for example, on Telehealth from one state to another. But we can expect that trend. I think that generally that e-commerce as opposed to regular mail order is going to be much more important. And we'll be thinking about that as part of digital acceleration. So we'll be thinking about that, I talk about for -- the 3 pillars of AmerisourceBergen: community pharmacy, community veterinarians, community oncologists and physicians, specialty physicians. We'll be thinking about how to assist all of them with that digital transformation. In fact, our strategy groups, some of the smartest people in the company, we've been thinking through that, and we're getting ready for that. And that's part of the comment about AmerisourceBergen being better prepared when we come out of this crisis, we'll be well positioned, as well positioned as we were going into it.

I think you also need to look at our diverse customer base. We are represented with anchor customers in every segment. And so we do benefit. Yes, I will admit, of course, that, of course, it's a high-margin business for us, the community pharmacy business than shipping to 100 mail order sites. Of course, that's true, and there's different working capital metrics associated with that. But we don't expect a very significant trend to occur once things emerge. We do think, again, that it's very important to bring those customers into e-commerce. On specialty, we have seen some patient -- new patient starts slow down. We've even seen some very specialized medicines in some of the basic medical business slowdown. But we do believe, and I think with a lot of logic and experience, that those will be some of the first prescriptions and the first visits to come back, as I referenced.

Oncology is holding up well. Again, the softness has really been related to lower new patients. The longer the restrictions continue, we would expect further weakness or if there's a reemergence of hotspots in certain areas. The hospitals, we believe, are continuing to resume to normal operations, and that will be a positive trend for us. And a pathology report has been a key gating factor towards getting new diagnosis for oncology and we believe all of those areas are starting to open up. So I've rambled on quite a lot of chat. I'm sure we're going to get to some more questions, but excellent question, Lisa, and good to hear your voice.

Thank you.

Our next question comes from Robert Jones with Goldman Sachs.

I guess, Steve, maybe just to pick up there on the physician-administered side. Obviously, there's been an impact. As you guys have highlighted and we've seen in the marketplace, the specialist oncologists has not been -- the visits there have not been immune, clearly, to the pandemic. Any sense you can give us on how those scripts have trended, specifically relative to the broader prescription market? And then I know you said you expect the channel to be down, but can you give us any more on the order of magnitude and maybe timing of how prolonged do you think the weakness could be within the specialty channel?

Yes. I mean I -- as I -- Bob, hope you're doing well. So referrals have been impacted and patient visits at some specialty practices, as I mentioned, have been working through essentially the limitations of operating in a social distancing world. Our physicians have, as we understand, started using Telehealth as much as possible, and also they've had to use no waiting rooms, texting people to come upstairs for visits, et cetera. So everyone had to adapt to the new order and, again, we anticipate that would carry on for a couple more weeks or a couple more months. And of course, lower visits and delay in pathology reports, et cetera, and new diagnoses has led to a mix of some lost sales. And -- but we do believe it also will lead and has led to pent-up demand.

So when you think about complex illnesses, the therapy is extremely valuable, life-saving to those patients, and we expect that, that will be the first to resume and there will be a real pent-up demand. And those physicians are going to be kind of analogous to the ER physicians. They're going to have to keep working around the clock literally to keep up, I think, once everyone feels safe to go back to the offices. And also, we think that it will vary by state, as certain states reopen or certain states have less hotspots areas. So we are a national business, so we'll see that resume.

And of course, it goes without saying that people with critical illnesses need to be examined, referred and treated by the specialists. Oncology has been holding up relatively well, probably because those patients who were under treatment are continuing their treatment. Ophthalmology has been under pressure. We're starting to see some trends of normalizing or stability. And again, I talked about the pathology reports and the hospitals being able to return. So an increased availability of testing would allow for a more capable operating environment for physicians.

So I hope that gets your question, Bob. Jim has a comment, please?

Yes. Bob, one thing I'll add, and this was in my prepared remarks, but for emphasis, we have, of course, been monitoring weekly sales trends in the month of April. And of course, we typically wouldn't talk about the most recent month on an earnings call, but given the current environment, we wanted to provide that additional color and clarity. And as I said and as Steve mentioned, during the month of April, oncology and the specialty physician market, we still saw solid growth and where we saw the decline within non-oncology physician specialty market, as Steve said, things like ophthalmology. But we did see those sales declines moderate towards the end of the month. And of course, we don't want to put -- overly emphasize a single week or a single month, but I think that those additional numbers and trends are helpful to think about.

Our next question comes from Eric Percher with Nephron Research.

Appreciate your comments on the mission of the organization at this time. Question on the supply side. I know there's some shortages relative to demand, but have you seen any shortages relative to supply, particularly in the Generics market? I'd be interested to hear your thoughts as we think about creating more resiliency or diversity. Does that lead to an increase in input cost for some period of years as we attempt to build that resiliency?

Yes. So we have seen the market increasingly focused on access and the importance of access and the importance of supply. One of the things that we've seen, Eric, this year, which won't surprise you, is a moderation of generic deflation. And that's one thing that has benefited us during our fiscal year '20, and we had called out on a couple of our recent earnings calls that we had started to see a moderation, but we said it was too early to call a trend. That's something that we've continued to see, the moderation of generic deflation, and part of that is likely related to the current environment and really the increased focus on access and supply and security. And so that is one of the things that we've been seeing in the last several months.

Yes, Eric, it's -- we are spending a lot of time. First of all, I'm extremely proud of our supply chain group. They have sourced so expertly and so thoughtfully. And as I've said before, they were ready when this crisis hit. We didn't get everything 100% right, but we inventory upped where we needed to. And on the API side, we're looking for manufacture partners. ABC has a history, along with our partner, WBAD, of emphasizing quality and predictability over price. And we work hard to ensure that we have strong manufacture partners. And I think you've also seen our partners step up. I've spoken to a couple of generic manufacturer presidents and CEOs and they've all been working like they are in the front lines, and we're extremely proud of the work that they've done to assist patients through this crisis.

Our next question comes from Glen Santangelo with Guggenheim.

Steve, I just wanted to kind of get your take on the balance sheet. In speaking with investors, there's always a lot of focus here. And so I'd be curious to get your take on updated thoughts on capital deployment. And I appreciate the first priority is always internal investment, but it maybe seems based on your actions here that repo may be starting to look more attractive. I'd also be curious how you think about the dividend, given the market's appetite for yield, maybe a shift in the M&A landscape, given the current environment and just taking all that into consideration while the opioid litigation is still sort of outstanding and any updates there would be helpful.

Thanks. I'll just reiterate that we've always said, you remember Dave, he always used to say to me, when you ever get a question that you don't like, what you're worried about, just say Washington. Well, that ended up being very true, right? That is what you're worried about was regulation and reimbursement, and it became much more apparent over my tenure than over his.

But the other thing I think is that we say, which is really happens to be true, is our first priority is internal investments. Jim has really detailed how important those investments in IT, infrastructure, distribution, business continuity plan has been incredibly fortuitous, productive for our businesses. And I would say that the other thing that we've invested in a lot is communications and culture. And maybe that's not something that is communicable that well to investors. But it's been incredibly important. The constant communication we've had to our people has been one of the best investments that we've had throughout this period. And that's because we have quite a great intranet site and we have had the ability to have 70% of our associates working at home, but still be able to support them. And we have had town hall meetings where we have over 6,000 people. So I think that's very important.

As far as M&A goes, we always are open to look at it. We haven't seen the value offer there. A lot of our interest in M&A has been in the commercialization services area. We've -- that is very much we need really good technology, good people, good customer bases. And we literally think that when we look at acquisitions, they should be additive to our own businesses and at least equal policy. And we often just don't see that. And then the PE market has been very, very robust. So that's just hasn't been [anything].

I'll hand over to Jim because you asked a broad question. But now let me just say on opioid litigation. We have been busy with the pandemic. So there's essentially no substantive update. And we remain very focused on the company's critical needs at this time, but we do believe that the global settlement that has been offered is one that should be taken very seriously. And we hope that -- we hope that the necessary parties will see that the merits of the potential global framework, and we'll continue our efforts on that front.

Jim has to add something.

Yes. Yes, Steve, what I'll add on capital deployment is, Glen, as you know, this year -- so far in this fiscal year, we've done about $400 million of share repurchases. And then also, it was in our press release today, we announced a new share repurchase authorization. We were getting towards the end and used up most of our prior share repurchase authorization. So we announced a new share repurchase authorization today. And then also, of course, as you're aware, we recently increased our dividend in January also.

Our next question comes from Charles Rhyee with Cowen.

I wanted to focus on the Other segment a little bit here. You're talking about a double-digit decline in revenues here in the fiscal third quarter. I guess a couple of questions, where is most of it would you say is coming from -- I kind of gleaned that maybe it's coming more from MWI, but I think with World Courier, there were some revised clinical trial guidelines issued by the FDA. Wondering how much -- what kind of impact is that having on World Courier. And maybe globally, what are other countries doing in terms of how they are curtailing or modifying their guidelines for clinical trials? And is there any impact on the consulting side given that perhaps pharma's maybe a little bit more insulated from a direct impact from COVID?

And then just lastly, Steve, I think you were answering Glen's question is about opioids at the end, I kind of missed that. Is it that you expect that we should get to a global framework still at some point? Or is that something that you would expect that you'd have to wait until the pandemic has really settled down before states could kind of revisit and regroup back to discuss the issue.

Yes. Let me start, and I'll address the question you had, the extensive question you had on our Other segment. And what we indicated today is that for the segment, for the fiscal year, we're expecting the decline of operating income to be in the low single-digit percent range for the fiscal year. And the 2 largest businesses in the Other segment are MWI and World Courier. So I'll really kind of focus my remarks there. And MWI had a really strong quarter. We disclosed the revenues in the Q. Revenue growth was 10%, strong operating income growth during the quarter. It's really well positioned. But the animal health market will be impacted by COVID-19 and MWI will be impacted.

Companion animal vet visits are impacted by social distancing. Production animal will be impacted by substantially reduced sales of protein to restaurants and hotels and also be impacted by some supply chain issues due to closed packing plants. I think probably companion animal will come back quicker than production animals. And -- but both markets will come back and be strong. And MWI is really well positioned in the market. Steve talked in his prepared remarks about some of the technology things MWI is doing. And when that market comes back, MWI will be as strong or stronger than ever.

Very quickly on World Courier. It's a really interesting case study. If we had looked back a couple of months ago, we would have thought the World Courier would have been one of our businesses most impacted by the onset of COVID-19 because of its international presence, whether it be in China or South Korea or Italy or any of the other countries where it operates. So what we found is that something we always knew that World Courier really excels by managing complexity for manufacturers. And so what we're seeing is World Courier, while number of shipments might be down, weight's up, the shipments to in-home settings is up. And as we look at World Courier today, the impacts of COVID-19, we think -- well, the impact or the impacts will be significantly less than what we would have thought of a couple of months ago.

With regard to the rest of the businesses in the group, there will be some impact in consulting, but like the rest of AmerisourceBergen's businesses, they're resilient and will be very manageable.

Yes. And then just an update -- just to be additive to what I said earlier. There's really no substantive update. Over the past 2 months, clearly, a lot of us probably including the litigants, have been focused on the pandemic response. But as we have previously said, we continue to hope that the ministry parties will see that merits of a potential global framework, and we'll continue our efforts on that front.

Our next question comes from Steven Valiquette with Barclays.

Steve and Jim, I hope you guys are staying safe. Just a quick follow-up on MWI. I guess the same in that there was a pull forward of volume on the human prescription side. Curious to get a little more color whether that was also happening on the companion animal side. And also with all the headlines right now in the press around protein processing, et cetera, and some bottlenecks there, how much is that impacting that business right now? I just want to get a little more color on those particulars within animal health.

Sure. Just like a lot of our businesses at AmerisourceBergen, there was some pull forward of revenue at MWI and the animal health market at the onset of COVID-19 that happened in animal health, just like it happened in many of our markets. And the production animal market really is impacted. And I commented this on earlier, and it's really 2 things. It's a demand issue from restaurants and hotels and institutions that are largely closed. And then there are supply chain issues related to closed packaging plants or even things like the packaging required for certain markets. There's a shortage of packaging for certain markets and an oversupply of packaging for other markets where demand has gone down. And so as we do look at the business, we do think that companion animals will come back quicker than production animals. But as I said before, both markets will come back and MWI is really well positioned. So when the market does come back, it will be as strong or stronger than ever.

Our next question comes from Eric Coldwell with Baird.

I was about to hop to another call, so I'm sorry if I just missed this answer. Did you specifically quantify the RX pull forward revenue into 2Q from 3Q, what you're thinking the quarter-over-quarter impact of that pull forward was, number one. Number two, this may be a bit off topic, but I think everybody is expecting an extremely high flu vaccine season as we prepare for the next wave. I'm curious if you can remind us what your historic exposure was to flu vaccine and if you have any early thoughts on what the potential as well as the timing of flu vaccine dosages might be.

Sure. I'll take the first part of that. We didn't specifically quantify the revenue pull forward, but the additional color that I'll provide that I believe will be very helpful is that we have -- we said we had a revenue and gross profit pull forward from Q3 to Q2. And -- but we also indicated that we had elevated costs, so there was not an operating income impact or at least there wasn't a significant operating income impact. And to provide a little bit more detail there, we established a incremental bad debt reserve of $19 million in the March quarter related to the onset of COVID-19. And it's not related to any specific customers, but we did consider the credit environment and financial strength of customers. So that's really what caused there to be a revenue in TP pull forward, but not an impact to operating income. And then there were some other smaller costs in the March quarter, which had to do with, like important things such as IT, work-from-home enablement, bonuses for frontline distribution center associates, cleaning supplies and services. And so for all those reasons, there was a pull-through of revenue income, gross profit, but not a significant impact on operating income during the quarter.

On flu vaccine, we don't comment on individual products, but our COVID task force, I actually had a meeting yesterday with them, and we are starting to think through what could be much more sustained demand. And vaccine is a little bit unusual, just to give you some color. But it is an area where manufacturers do, do more direct sales. And there are other distributors. If you look at the broad prescription market, AmerisourceBergen, Cardinal and McKesson have very high market share. But when it comes to vaccine, there's more distributors, there's physicians, physician-distributors, et cetera, that play a role. So it is a much more bifurcated market. So I hope that gives you some color, but we do expect increased demand for sure. And we also expect manufacturers will step up.

So I think we have time, operator, for one more question.

And our next question comes from George Hill with Deutsche Bank.

I guess just 2 quick ones. I guess, Steve, could you differentiate, and this is particularly -- I'm asking for comments end of March through April, the performance of the chain drug stores versus the independent drug stores, have they basically performed the same? Or have you guys seen any meaningful difference? And Jim, I don't know if you would remind us kind of the non-oncology versus oncology sizes inside of the specialty segment, just so we can kind of put some context around the underperformance of the non-oncology businesses versus the oncology businesses.

There have been some early changes in prescription data, which are so intuitive. So there was some increased utilization of mail order. I think we've talked about 90-day scripts being pulled forward, but I thought CBS talked about that a bit yesterday. But really market share, retail market shares hold up pretty well. I think, overall, we think that our customers will adapt. And our general belief is that things will settle close to where they should be. And just let me reiterate that AmerisourceBergen is well positioned with key anchor customers, including in the mail order sector. And of course, our specialty script business will be a great driver for long-term growth.

So we're up to 9:30. So I'm going to close up. I just want to thank you all for your time today. I have to sincerely say that during these past 3 months, I've never been prouder of the role that AmerisourceBergen plays to ensure healthier futures. And before we close the call, I want to take a moment to thank all the members of the health care community who are working tirelessly to help our country and, indeed, the world manage through this crisis. Our hearts and deep sympathies lie with all the many victims of this pandemic. Have a good day, and thank you for your attention and interest in AmerisourceBergen. Thank you.

Thank you. This concludes today's conference call. You may now disconnect your lines, and have a wonderful day.